Why losin your job is time to keep your head

Tips on how to get your finances sorted if you are hit by the hammer blow of redundancy

REDUNDANCY is a terrible shock – nothing can prepare you for the sledgehammer blow of suddenly losing your job and your future being thrown into chaos.

And then there’s the damage it can do to your finances – so it’s vital that you know your rights and the best way to protect your money.

YOUR RIGHTS

If you have worked for your employer for two years or more, you have the right to statutory redundancy pay.

This is a legal minimum and your employer can’t pay you less – although some firms are more generous and may offer their own better terms.

The statutory redundancy you get is based on how long you’ve been in your job and your current salary – capped at earnings of £538 per week.

There is also an overall maximum statutory amount you can get, capped at £16,140 in this tax year.

Only complete years of service count and it has to be continuous. Age plays a part too.

Under 22 you get half a week’s pay for each year

Between 22 and 40 you get a week’s pay for each year

Over 41 you get a week and a half ’s pay for each year.

These are minimums and some firms will offer more generous redundancy terms. If you’re going to get more than basic redundancy, the first £30,000 is tax free.

When it comes to notice periods, your employer must give you a statutory minimum of one week’s notice of for up to two years’ service and one week’s notice for each year you’ve worked after that – up to a maximum of 12 weeks’ notice.

Yo u may have a longer notice period in your contract so check that.

Also you may be expected to work this period or you might be allowed to leave earlier. In this case, you’ll get pay in lieu of the notice period too. If you have any holiday owed, your employer must pay you for it or let you take your holiday before you leave. If you have worked there for less than two years, you are not entitled to receive a statutory redundancy payment.

CHECK COVER

Do you have a mortgage payment protection policy, payment protection insurance or short-term income protection cover? These can all help you to keep on top of your bills if you are made redundant. The level of cover and exclusions can vary greatly, so you’ll need to check the small print on your policy. They typically don’t pay out immediately – there is usually a deferral period of around three months. Mortgage payment protection policies pay out a set amount each month, typically three months after your earnings stop and usually for 12 months. But some will pay out for 24 months. Payment Protection Insurance – sometimes called Accident, Sickness and Unemployment (ASU) cover – is typically taken out on loans or credit cards and enables you to keep up repayments by paying out a set amount for 12 to 24 months. Again, payments typically start three months after earnings stop. Short-term income protection insurance replaces a part of your income for a fixed period of time – usually 12 or 24 months.

But don’t confuse this with other income protection policies which only pay out for sickness and ill health and not if you lose your job.

CLAIM BENEFITS

Depending on personal circumstances, you may be able to claim benefits. But be aware the system is complex, so get help. Try the likes of Turn2us.org.uk (where there is a benefits checker) or Citizens Advice or you the government website at gov.uk.

The main benefit is the new-style Jobseeker’s Allowance, based on your National Insurance contributions, which you can get for up to six months.

You may also be able to get help with housing and childcare costs via Universal Credit. It’s based on household income, so your partner’s income will affect how much you will get.

KNOW WHERE YOU STAND AND RE-BUDGET

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WITH DEBT

aying out large sums on or loans, you need to try e cleared as quickly and possible. Interest on many ducts is high and will take ks of your cash. edit card debt to a 0 per d work out how much you d can afford to) pay each get it cleared during uctory term. TSB offers 29 months, M&S Bank and Natwest 28 months, HSBC 25 months and MBNA 24 months.

Talk to lenders directly about any options you may have to switch to cheaper products, freeze interest or extend the term of a loan agreement to reduce the monthly repayments.

During these unprecedented times, these organisations are being more flexible and have been issued guidance from the Financial Conduct Authority to help find solutions to assist those struggling to manage their finances. If you have unmanageable debt, get free, independent advice from one of the debt charities.

Contact your local Citizens Advice or visit citizensadvice.org.uk, call the National Debtline on 0808 808 4000, ring Stepchange Debt Charity on 0800 138 1111 or stepchange.org.

BUILD A SAFETY NET

As soon as you possibly can – such as when you get back on your feet and have a new job – start putting a bit away.

It may seem hard at first but this is the best way to build up a financial safety net to give you some peace of mind for your financial future.